The events of recent days have shown why many are reluctant to invest in bitcoin. A tweet, even a word, from Elon Musk, and the cryptocurrency plunged.
For investors who are afraid of large fluctuations in the price of cryptocurrency there are other ways to invest in it without buying it.
Despite the ever-increasing capitalisation of bitcoin, investors are sceptical of cryptocurrencies.
Investors who want to invest in bitcoin without buying it have, according to Bloomberg, alternatives, which are gradually increasing. This year, the US Securities and Exchange Commission (SEC) is expected to decide whether to approve the listing of bitcoin-controlled investment funds (ETFs). On the other hand, there are already several companies associated with crypto and its shares have been listed on the stock exchanges. There are also companies that have bought so much bitcoin that their shares are affected by cryptocurrency price movements.
Investing in Grayscale Bitcoin Trust
This is the largest bitcoin fund in the world, owned by Bary Silbert. Despite the fact that Grayscale Bitcoin Trust manages assets of about $38 billion and would normally be in the top 20 US ETFs, it did not always behave like a mature ETF so it does not enjoy the huge profits of cryptocurrency. Another disadvantage of this Trust is that it charges a 2% commission for its management.
Investing in companies associated with bitcoin
Coinbase cryptocurrency trading platform is the third alternative for many investors, according to Bloomberg. As it mentions, its biggest disadvantage is that the company is as new as bitcoin itself.
Although its introduction to the Nasdaq market in April led to a market capitalisation of $100 billion, it plummeted by 40% in the following days.
As most of Coinbase’s revenue comes from the commissions it charges its users, its valuations have a high correlation rate with the price of bitcoin. “Our net income essentially depends on the prices of crypto assets and the volume of transactions made through our platform,” the company said in a document submitted to the SEC.
Alternatively, investors can focus on companies that have significant positions in bitcoin, such as Tesla, which has allocated $1.5 billion to buy the cryptocurrency. Other companies with large holdings of bitcoin are MicroStrategy, a business software company, and Galaxy Digital Holdings.
Investing in Canadian funds in Bitcoin
The Canadian Securities and Exchange Commission has approved two ETFs in bitcoin, which manage more than $2 billion in assets, some of which are in bitcoin.
Although American investors have the opportunity to invest through these funds, their funds are treated as investments abroad, for which special licenses are required. Such investments may also involve foreign exchange risk.
The risk of investing in this fund is proportional to the direct purchase of cryptocurrency.